New State Bank of Vietnam circular removes obstacles for stock market status upgrade

A new State Bank of Vietnam (SBV) circular will address bottlenecks in managing indirect investment capital flows and create favorable conditions for foreign investors, contributing to achieving a status upgrade for the country's stock market.

Account opening time shortened for foreign investors

Under Circular 03, dated April 29, 2025, all receipt and payment transactions related to foreign indirect investment in Vietnam must be conducted through an indirect investment account which is a payment account in Vietnamese dong opened by the foreign investor at a licensed bank. Account balances are not allowed to be transferred into term deposits or savings deposits.

All money transfer orders related to foreign indirect investment activities must clearly state the purpose of the transfer so that the licensed bank can compare, verify, archive the documents, and process the transactions accordingly.

Indirect investment activities in Vietnam that require the opening and use of an indirect investment account include trading securities on the stock exchange, buying and selling other valuable papers, contributing capital, purchasing shares of or contributing capital to unlisted companies not subject to direct investment account regulations under the SBV’s Circular 06 dated June 26, 2019, and entrusted investments in Vietnamese dong.

Foreign investors are only permitted to open one indirect investment account at a licensed bank, except in certain cases. For example, foreign securities companies are allowed to open two accounts: one for proprietary trading and one for brokerage activities.

Foreign investors such as investment funds and foreign organizations managed by multiple foreign fund management companies can open additional indirect investment accounts corresponding to their issued securities trading codes.

If a foreign investor wishes to open an indirect investment account at another licensed bank, he/she must transfer the entire balance from the current account to the new one and close the former.

Once Circular 03 comes into force on June 16, Circular 05 dated March 12, 2014, which guided the opening and use of indirect investment capital accounts, will become invalid.

The issuance of Circular 03 replacing Circular 05 significantly shortens the time required for foreign investors to open trading accounts. This is because foreign investors are no longer required to get consular legalization of documents when opening indirect investment accounts. This is a key improvement that facilitates account opening for foreign institutions. Previously, due to legalization procedures, the process could take months but now, it is much quicker.

Bottlenecks to market status upgrade gradually removed

This marks another important bottleneck removed in the journey to upgrade the Vietnamese stock market status from "frontier" to "emerging". Earlier in March, the State Securities Commission (SSC) announced nine groups of strong measures to facilitate foreign investor participation in Vietnam, aiming for the upgrade.

In early May, the KRX trading system began stable operations, resolving a major technology bottleneck essential to the upgrade process.

As of now, most of the planned solutions have been implemented by the SSC in line with the roadmap. Two key items remain, including implementing the central counterparty clearing (CCP) mechanism and deploying omnibus trading accounts (OTA).

The OTA allows fund management companies to simultaneously conduct securities trades for all the funds they manage, rather than placing separate buy/sell orders for each fund. Deploying OTAs will help foreign institutional investors and fund managers simplify trade orders and ensure that all trades are executed at the same price for each fund the companies manage.

The SSC is studying this mechanism to be applied to foreign investment funds first, aiming for completion before August 2025.

Meanwhile, the CCP mechanism is planned for implementation in 2026. Preparatory steps include establishing a subsidiary of the Vietnam Securities Depository and Clearing Corporation (VSDC), finalizing payment processes between VSDC and its members, and allowing commercial banks to act as clearing members.

Vietnam's benchmark VN-Index fell 11.81 points, or 0.9%, to 1,301.39 points last Friday, after rising in the previous four sessions.